Guy Debelle: Housing and the economy

Address by Mr Guy Debelle, Deputy Governor of the Reserve Bank of Australia, at the CFA Societies Australia Investment Conference, Sydney, 17 October 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The housing market has a pervasive impact on the Australian economy. It is the popular topic of any number of conversations around barbeques and dinner tables. It generates reams of newspaper stories and reality TV shows. You could be forgiven for thinking that the housing market is the Australian economy. That clearly is not the case. But at the same time, developments in the housing market, both the established market and housing construction, have a broader impact than the simple numbers would suggest.

This has been known for a long time, but often housing cycles have occurred simultaneously with other events. For example, the housing downturn in the early 1990s occurred at the same time as the 90s recession. As a result, it can be difficult to fully isolate the direct effect of the housing market itself from the other forces at work. We have models which go some way towards doing this, but they also tend to suffer from the problem of disentangling the various factors.

Over the past few years, the housing cycles have moved in different directions, and varied quite considerably around the country.